On the heels of the agreement reached by Shell to sell its Nigerian onshore subsidiary, the Shell Petroleum Development Comed (SPDC), to Renaissance, The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has unveiled its divestment framework consisting of pillars to guide the assessment of applications for ministerial consent for divestment.
The SPDC JV assets are currently operated by the SPDC on behalf of its Joint Venture (JV) partners namely NNPCL Limited and Total Upstream Nigeria Limited, Nigeria Agip Oil Company and SPDC. The SPDC JV OMLs were originally awarded as Oil Exploration Licence -1(OEL-1) on 1 January 1949 covering the whole of southern Nigeria and Cameroon. Ultimately, the assets were converted to OMLs on 1 April 1962 and subsequently renewed in 2014 and 2018 for 20 years.
Renaissance is a consortium of five companies made up of ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin.
Read also:SPDC gives insights into divestment options amid oil theft, deaths, harm to investments
Speaking during the NUPRC-SPDC divestment workshop in Abuja on Monday, Gbenga Komolafe, the Commission’s chief executive, NUPRC noted that the assets being considered have an estimated total reserve of 4.96 billion barrels of oil, 1.77 billion barrels of condensate, 28.16 trillion cubic feet of associated gas and 28.11 trillion cubic feet of non-associated gas, making it a significant contribution to the nation’s hydrocarbon resources.
According to him, the workshop aims to provide a platform to identify a successor who does not only possess the requisite financial resources but also demonstrates the technical expertise to responsibly manage these assets throughout their lifecycle.
Read also:SPDC appeals asset sale judgment on controversial OML 11
He said, “We must ensure that the inherent environmental and end-of-life liabilities i.e. decommissioning liabilities are accurately identified, and assigned to the party best equipped to bear the associated risks. This necessitates a comprehensive understanding of regulatory requirements, industry best practices, and the unique challenges inherent in oil and gas operations.
“Additionally, these assets hold reserves estimated at 2.85 billion barrels of oil, 850.85 million barrels of condensate, 11.3 trillion cubic feet of associated gas and 12.26 trillion cubic feet of Non-Associated Gas.
“Permit me to emphasize that the NUPRC is committed to free entry, free exit business principles aimed at encouraging investors in the sector. We understand the importance of providing a stable regulatory framework that instills confidence and encourages investment. To this end, we have implemented robust measures to streamline regulatory procedures and eliminate unnecessary barriers to investment.”
According to Komolafe, the Commission has developed a divestment framework consisting of pillars to guide the assessment of applications for ministerial consent to the SPDC divestment and other similar divestments.
These pillars include; technical capacity, financial capacity, legal, host community trust / environmental remediation fund, industrial relations and labour issues, data repatriation and decommissioning & abandonment.
Read also:Activities of pipeline vandals detrimental, dwindling economy – SPDC
He stressed that the successor entity must demonstrate proven and verifiable capacity to operate the asset vigorously and in a business-like manner. He also said that the Commission shall assess the prospective successor entity’s balance sheet and financial viability and verify readiness to undertake a defined work program and fulfill required obligations on the assets.
“The acquiring entity must in line with the interest of the nation be ‘fit and proper’ persons in the eyes of the law. Clear evidence of the resolutions of legacy debts and legal encumbrances must be established and appropriate mechanisms to manage residuals agreed upon. Decommissioning & Abandonment (D&A) Applicable D&A costs must be diligently assessed and ensure settlement of outstanding obligations. Commission to ensure that potential exposure of the Nigerian government to decommissioning liabilities is averted.
“The Commission shall assess the status of host community trust fund obligations and ensure the robustness of the successor entity’s adherence to decarbonisation plans and sound Environmental Social & Governance (ESG) principles.
The Commission shall implement a robust assessment mechanism to avert undesirable labour union issues and disharmony arising from the divestment process. Concerned parties shall endorse a “Certificate of Settlement” to validate alignments reached on all labour issues (staff welfare, benefits, entitlements as well as disengagement, redundancies, retirement etc.). The aim is to ensure the nation averts socioeconomic disruptions arising from failure to resolve labour issues that might result because of post-divestment.
“Let me emphasize that the NUPRC wholeheartedly welcomes investment in the Nigerian upstream petroleum sector. We recognize the critical role investment plays in driving innovation, creating employment opportunities, and ultimately fueling economic prosperity for our nation and its people. Therefore, we are always eager to welcome local and international investors who choose to invest in the Nigerian upstream petroleum sector.
He reiterated the commitment of the Nigerian government to facilitate and support investment initiatives that align with the national development goals, adding that cooperation with the investment process is essential. “I urge SPDC and Renaissance to engage proactively, adhere to regulatory requirements, and work collaboratively with the NUPRC to ensure the successful conclusion of the Shell Divestment.”
In his remarks, Wessel Haas, the deputy managing director, SPDC Assets said that the workshop was critical to the divestment process as it provides the clarification to make sure the regulators complete its due diligence process.
